Online sports gaming company DraftKings (DKNG +2.55%) has only been a public company since April 17, 2020, and little sports has been going on since that time. Yet the share price has more than doubled off its approximately $17 offering price.
Now Jefferies analyst David Katz has initiated the company as a buy recommendation, with a price target of $55, representing 38% upside from today's opening price. The analyst says the company is in the "best position to capitalize" on digital sports gambling in the U.S. Katz believes that online sports gambling is in the beginning stages of growth that will lead to a $19 billion market in the next three to five years.
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DraftKings CEO Jason Robins has said that his "No. 1 focus from a product perspective" is in-game betting. He believes gamblers in the U.S. will be attracted more to these "prop bets" that rely on specific, in-game events that aren't necessarily related to the outcome. Currently, Robins says that 75% of revenue at sports books in the U.K. come from in-game bets.
The potential popularity in the U.S. was on display during May's "The Match" golf tournament with Tom Brady, Tiger Woods, Peyton Manning, and Phil Mickelson, as gamblers bet on aspects of every hole. Katz thinks that the popularity in other markets "suggest that it could be larger than expected," in the U.S.
DraftKings is also expanding, as it recently announced it was moving into Michigan with a partnership with Bay Mills Resort and Casinos, to bring sports books to their regional casinos in the state. As sports return in one form or another, it seems that DraftKings has put itself in a good position to reap benefits from the pent up interest.
